Budget Project – 200 Points
WARNING: PROJECT RULES:
Do your OWN work – copying or using the work of others/3rd Party resources (i.e., Chegg, Bartleby, Course Hero) will result in an automatic ZERO without warning or additional opportunities. Plagiarism software may be employed.
REVIEW THE INTEGRITY POLICIES OUTLINED IN THE SYLLABUS
NO USE OF THIRD PARTY – CITE ANY MATERIAL OR RESOURCES of INFORMATION THAT IS NOT YOUR OWN!
Cayman Kayaks (CK)
Valeria (which translates to “strength”) Ikaika is preparing the 2023 budget for one of CK’s best-selling kayaks. Extensive meetings with members of the sales department and executive management team have resulted in the following quarterly unit sales projections for 2023.
| Quarter 1 | 1,110 kayaks |
| Quarter 2 | 2,070 kayaks |
| Quarter 3 | 1,250 kayaks |
| Quarter 4 | 1,055 kayaks |
CK’s policy is to have finished goods ending inventory in a quarter equal to 12% of the next quarter’s anticipated sales. Preliminary sales projections for 2024 are 1,250 units for the first quarter and 2,245 units for the second quarter. Ending inventory of finished goods at December 31, 2022, will be 30 kayaks.
Production of each kayak requires 36 pounds of polyethylene powder (used in the molds to create the kayaks) and a single finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 18% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2022, is 13,115 pounds. The finishing kits are outsourced and can be purchased as they are needed to fulfill sales orders. As a result, CK does NOT maintain any significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.05 per pound, and the finishing kits cost $173 each. Production of a single kayak requires 1.75 hours of labor by more experienced, type 1employees and 3.75 hours of less-experienced type 2 employees. The type 1 employees are paid $28 per hour, and the type B employees are paid $19 per hour.
Selling and administrative expenses for this line are expected to be $35.25 per unit sold plus $6,450 per quarter. Manufacturing overhead is assigned at 154% of labor costs.
Instructions:
NOTE: Always review the grading rubric for information on how your project will be scored/evaluated.
STEP 1: Prepare the required budgets using ONE excel or google (sheets), you MAY want to use multiple tabs in a file as this will likely help your format/presentation score.
All calculations MUST be done using embedded formulas in the submitted excel/google spreadsheet, numbers that transfer from one location to another MUST be linked/referenced.
See instructional videos that have been provided if you need help understand formulas, functions and cell referencing.
STEP 2: You may discuss and work with other students but you must complete ALL WORK MUST BE DONE BY YOU AND ON YOUR OWN. No two projects should ever look alike!!
STEP 3: Using the format demonstrated in your textbook – Prepare the following budgets (remember: be sure to show/demonstrate ALL calculations – include quarterly AND yearly totals) using excel or google sheets:
- production budget
- direct materials budget
- direct labor budget
- manufacturing overhead budget
- selling and administrative budget
STEP 4: Assume you are in a management position and are asked by top executives to propose a sales price for this kayak model that would be competitive, reasonable and profitable based on projections.
You realize that if your proposal is accepted it could mean a huge promotion and/or bonus. You may use whatever information, research, visualizations or resources you would like to help you determine a sales price and then justify your decision.
It is essential that you effectively support your pricing decision with enough arguments/reasons to convince these executives of your proposal. Keep in mind, just determining a price that results in a profit would be the MINIMUM expectation – that will not be enough!
STEP 5: Once you have your sales price decision, prepare these last two budgets (again, be sure to include quarterly AND yearly totals):
- Sales Budget
- Budgeted Income Statement
